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Australia shifting to a solar future

By Justin Bull

March 27, 2014

Solar energy in Australia is evolving from a disruptive new entrant to an entrenched incumbent as panel prices steadily decline and new financial models emerge. The shift is upending the traditional grid, and has incumbents worried.

According to David Green, CEO of the Clean Energy Council, the logic of energy generation has irrevocably shifted. Centralized grids with power plants close to raw materials are ill-suited to a low-carbon future. And with the price of solar panels steadily declining, traditional power sources will soon find it hard to compete on cost.

Solar is also benefitting from innovative business models. Solar leases are quickly replacing outright purchase of panels, giving home owners the benefits of solar without the upfront costs. And a new wave of financial instruments are allowing panel providers to expand even more aggressively.

But this utopia of decentralized, low-emissions energy won’t come easily. The centralized grid, a profitable business model for 100 years, still supports incumbents – from coal miners to power plant owners to grid operators – who reap huge profits and can sway politicians and regulators.

The optimistic view of the Green Council CEO stands in contrast to a story covered last week by Clean Capital. The current federal government in Australia has little appetite for tackling climate change or promoting the clean economy, and has been undermining investors confidence in the Australian market. But the economic logic of distributed solar generation is strong enough to weather a lack of political support.

In many jurisdictions the shift towards solar energy has been met with pushback. In Arizona, grid operators successfully secured extra fees for rooftop solar panels connected to the grid. In Spain, the government recently imposed a steep levy on domestic solar panel owners, tilting the economic scales and making solar less affordable than conventional grid electricity.

But in other places, like China and India, governments are concerned about the economic and environmental toll imposed by traditional sources of energy. The leading candidate to win India’s upcoming elections, Narendra Modi, is hinting that his government won’t support any new coal projects and instead will encourage massive growth of solar panels in his country. In China, the government has initiated another round of investments in renewable energy in order to curb air pollution and wean the country off costly fossil fuels.

Canada benefits from legacy hydroelectric projects that provide the country with almost 60 percent of its electricity. But the country is also heavily reliant on the export of polluting fossil fuels, in particular, oil derived from the tar sands of northern Alberta.

But solar innovation is still taking place. The largest photovoltaic project in BC is owned and operated by the T’Sou-ke First Nation on Vancouver Island, helping the community cut its electricity use by 75 percent. Rather than witness solar panels pop up on the roof tops of suburban homes, Canada is likely to see remote and rural communities develop their own renewable energy supplies, reducing their reliance on expensive and dirty diesel generators.